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History of Insurance

Historians believe that the concept of insurance has been around human existence from the time of King Hammurabi. The act of using insurance to spread risk is available in the form of the primary written policy on the Babylonian obelisk with the King Hammurabi code engraved on it. The foremost authenticated insurance contract wherein which the real concept of insurance between the insurer and the insured has been truly displayed is the marine insurance contract. The contract was drawn on a ship named as the ‘Santa Clara’ and this incident seems to date back to 1347 in Genoa. The policy has been actually drawn in the Italian language and on first glance appears to be a kind of maritime loan.

Underwriting slowly began to emerge in London coffeehouses which operated as the unofficial stock exchange for the British Empire. The initial kinds of insurance contracts have no resemblance to the modern day insurance contracts. The earliest forms of insurance contracts were drawn either as a fictional sale or loan and only when these contracts were discovered the insurance aspect in these contracts were recognized and accepted. The initial insurers were recognized as merchants underwriting risks for fellow merchants and they performed this on a part time basis. In the 1800s and the 1900s, you will be surprised to note that premiums were not analyzed through statistics but were recognized by the means of haggling. During this period, insurance was not introduced through judicial or legislative innovation but was actually introduced by merchants for commercial feasibility and need.

In the earlier period when insurance was introduced, it was devised in such a way whereby which anyone could obtain an insurance policy on anyone of their choice, even for complete strangers. Thus, by doing so when the insured died, the policyholder could reap the benefits of the policy with no financial or emotional loss. Slowly, a growing loophole was observed in this scenario and thus a primary governing rule of insurance was issued which is now referred to as the insurable interest.

In the current times, a clear picture of insurance is issued and insurance is clearly differentiated from investments. While there is clear risk associated with investments, insurance revolves around the possibility of losses. While talking about risks, they are of two varieties; one is the speculative risk arising out of gambling and stock market investments which cannot be insured and then there is the pure risk which includes the possibility of loss which is insurable. Thus, the history of insurance is not only interesting but the whole trend definitely shows us that the concept of insurance has been present in our society for centuries together.